Principal Amount: $50,000
10% CONVERTIBLE NOTE
DATED February 19, 2020
THIS NOTE(the "Note") is a duly authorizedConvertible Note ofAB International Group Corp., a Nevada corporation (the "Company").
FOR VALUE RECEIVED, the Company therefore promises to pay the Holder, the principal sum of $50,000 (the "Principal Amount") or such lesser principal amount following the conversion or conversions of this Note in accordance with Paragraph 2 (the"OutstandingPrincipal Amount") twelve (12) months from the date of issuance hereof (the "Maturity Date"), and to pay interest on the Outstanding Principal Amount ("Interest") in a lump sum on the Maturity Date, at the rate of ten percent (10%) per Annum (the "Rate") from the date of issuance.
Accrual of Interest shall commence on the date of this Note and continue until the Company repays or provides for repayment in full the Outstanding Principal Amount and all accrued but unpaid Interest. Accrued and unpaid Interest shall bear Interest at the Rate until paid, compounded annually. The Outstanding Principal Amount of this Note ispayableon the Maturity Date in such coin or currency of the United States as at the time of payment is legal tender for payment of public and private debts, at the address last appearing on the Note Register of the Company as designated in writing by the Holder from time to time. The Company may prepay principal and interest on this Note at any time before the Maturity Date.
TheCompanywillpaytheOutstanding Principal AmountofthisNoteontheMaturityDate, freeof any withholdingor deduction of any kind (subject to the provision of paragraph 2 below), to the Holder as of the Maturity Date and addressed to the Holder at the address appearing on the Note Register.
This Note is subject to the following additional provisions:
1. All payments on account of the Outstanding Principal Amount of this Note and all other amounts payable under this Note (whether made by the Company or any other person) to or for the account of the Holder hereunder shall be made free and clear of and without reduction by reason of any present and future income, stamp, registration and other taxes,levies, duties,cost,and charges whatsoever imposed,assessed,leviedorcollected bytheUnited Statesor anypoliticalsubdivision or taxing authority thereof or therein, together with interest thereon and penalties with respect thereto, if any, on or in respect of this Note (such taxes, levies, duties, costs and charges being herein collectively called"Taxes").
2. The Holder of this Note is entitled, at its option, six (6) months after the Company’s receipt of the proceeds of the Note, to convert all or any lesser portion of the Outstanding Principal Amount and accrued but unpaid Interest into Common Stock at a conversion price equal to a price which is a 40% discount to the lowest trading price in the ten (10) days prior to the day that the Holder requests conversion,unlessotherwise modified by mutual agreement between the Parties (the "Conversion Price") (The Common stock into which the Note is converted shall be referred to inthis agreementas"Conversion Shares").TheIssuer will not be obligated to issue fractional Conversion Shares. The Holder may convert this Note into Common Stockbysurrendering the Note to the Company, with the form of conversion notice attached to the Note as Exhibit A, executed by the Holder of the Note evidencing such Holder's intention to convert the Note. If the Borrower is unable to issue anysharesunder this provision due to the fact that there is an
insufficient number of authorized and unissued shares available, the Holder promises not to force theBorrower to issuethesesharesor trigger an Event of Default,providedthat Borrower takes immediate steps required togetthe appropriate level of approval from shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion.
The Companywill not issuefractional sharesorscriprepresenting fractionsofsharesof CommonStockonconversion, but the Company will round the number of shares of Common Stock issuable up to the nearest whole share. The date on which a Notice of Conversion is given shall be deemed to be the date on which the Holder notifies the Company of its intention to so convert by delivery, by facsimile transmission or otherwise, of a copy of the Notice of
Conversion. Notice of Conversion may be sent by email to the Company, attn: CEO, COO. The Holder will deliver this Note,togetherwith original executed copy of the Notice ofConversion,to the Companywithinthree (3) business days followingtheConversion Date. At the Maturity Date, the Company will pay any unconverted Outstanding Principal Amount and accruedInterest thereon,attheoptionof theCompany,ineither(a) cash or (b) CommonStock valuedatapriceequaltotheConversion Price determined as if the Note was converted in accordance with its termsintoCommon Stock on the Maturity Date.
Notwithstanding the foregoing conversion privilege, in no event shall Issuer have the right to convert into, nor shall the Issuer issue to such Holder, shares of Common Stock to the extent that such conversion would result in the Holder and its affiliates together beneficially owning more than 4.99% of the then issued and outstanding shares of Common Stock. If the number of shares issuable to Holder is greater than 4.99% of the total issued common stock of the company, the Issuer must notify the Holder immediately. For purposes hereof, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder.
3. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to the payment of the Outstanding Principal Amount of this Note at the Maturity Date, and in the coin or currency herein prescribed.
4. If at any time or from time to time after the date of this Note, the Common Stock issuable upon the conversion of the Note is changed into the same or different numbers of shares of any class or classes of stock, whether by recapitalization or otherwise, then in each such event the Holder shall have the right thereafter to convert the Note into the kind of security receivable in such recapitalization, reclassification or other change by holders of Common Stock, all subject to further adjustment as provided herein. In such event, the formulae set forth herein for conversion and redemption shall be equitably adjusted to reflect such change in number of shares or, if shares of a new class of stock are issued, to reflect the market price of the class or classes of stock issued in connection with the above described transaction.
5. Events of Default
5.1. A default shall be deemed to have occurred upon any one of the following events:
5.1.1. Withdrawal from registration of the Issuer under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), either voluntary or involuntary.
5.1.2. Issuer filing for bankruptcy protection under the federal bankruptcy laws, the calling of a meeting of creditors, or any act of insolvency under any state law regarding insolvency, without written notification to the Investor within five business days of such filing, meeting or action.
5.1.3. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring or issuing (electronically or in certificated form)anycertificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threatnot to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion.
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5.1.4. Failure to pay the principal and unpaid but accrued interest on the Note when due.
5.1.5. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
5.1.6. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower's ability to continue as a "going concern" shall not be an admission that the Borrower cannot pay its debts as they become due.
5.1.7. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).
5.1.8. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.
5.1.9. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocable reserve shares of Common Stockin the Reserved Amount) signedbythesuccessor transferagenttoHolder andtheBorrower.
5.1.10. The failure by Borrower to pay any and all Post-Closing Expenses as defined herein.
5.1.11. From and after the initial trading, listing or quotation of the Common Stock on a Principal Market, an event resulting in the Common Stock no longer being traded, listed or quoted on aPrincipal Market; failure tocomplywith the requirementsforcontinued quotationon a Principal Market; or notification from a Principal Market that the Borrower is not in compliance with the conditions for such continued quotation and such non-compliance continues for seven (7) trading days following such notification.
5.2. Default remedies. Upon the occurrence and during the continuation of any Event of Default specified in Section 5.1. (solely with respect to failure to pay the principal hereof or interest thereon when due at theMaturityDate), the Note shallbecomeimmediatelydue andpayableand theBorrowershallpayto the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as definedherein). UPON THE OCCURRENCEANDDURING THE CONTINUATIONOFANYEVENTOF DEFAULT SPECIFIED IN SECTION 5.1., THE NOTE SHALL BECOME IMMEDIATELY DUE ANDPAYABLEANDTHE BORROWERSHALL PAYTO THEHOLDER, IN FULLSATISFACTIONOFITSOBLIGATIONS HEREUNDER,ANAMOUNT EQUAL TO:(Y)THE DEFAULTSUM(ASDEFINED HEREIN)). Upon the occurrence and during the continuation of any Event of Default specified in Sections 5.1. (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note, 5.1.1, 5.1.2, 5.1.5, 5.1.6,5.1.7,5.1.8, 5.1.9, 5.1.10, 5.1.11 exercisable through the delivery of written notice to the Borrower by such Holders (the "Default Notice"), and upon the occurrence of anEventofDefault specifiedin theremaining sections of Section5.1. (otherthan failuretopaythe principal hereof or interest thereon at the Maturity Date specified in Section 5.1. hereof), the Note shall becomeimmediatelydue andpayableand theBorrowershallpayto theHolder,in fullsatisfactionofitsobligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Noteplus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the "Mandatory Prepayment Date")plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) (the then outstanding principal amount of this Note to the date of paymentplus the amounts referred to in clauses (x) and (y) shall collectively be known as the "Default Sum") or (ii) the "parity value" of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the "Conversion Date" forpurposes of
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determiningthelowest applicable Conversion Price, unless the Default Event arisesas a result of such breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date,multipliedby (b) the highest Closing Price for the Common Stock during the periodbeginningon the date offirstoccurrence of the Event of Default and ending one day prior to the MandatoryPrepayment Date (the "Default Amount")andall other amountspayable hereunder shall immediatelybecome due andpayable, all without demand, presentmentor notice,allof whichherebyareexpresslywaived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at low or in equity.
If the Borrower fails to pay the Default Amount within five (5) business days of written notice thatsuch amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.
6. Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth on the table immediately following this paragraph (the “Prepayment Periods”), the Borrower shall have the right, exercisable on not more than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 6. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the direction of the Holder as specified by the Holder in awriting to the Borrower (which direction shall to be sent to Borrower by the Holder at least one (1) business day prior to the Optional Prepayment Date). If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash equal to the percentage (“Prepayment Percentage”) as set forth in the table immediately following this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (i)the then outstanding principal amount of this Note plus (ii) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (iii) Default Interest, if any accrued thereon. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 6.
Prepayment Period | Prepayment Percentage |
1. The period beginning on the Issue Date and ending on the date which is one hundred eighty (180) days following the Issue Date. | 110% |
After the expiration of one hundred eighty (180) days following the Issue Date, the Borrower shall have no right of prepayment.
7. The Company covenants thatuntil all amounts due under this Note arepaidinfull, byconversionorotherwise, unless waived by the Holder or subsequent Holder in writing, the Company shall:
give prompt writtennotice to theHolder of any Event of Default or of any other matter which has resulted in, or could reasonably be expected to result in a materially adverse change in its financial condition or operations;
give prompt notice to the Holder of any claim, action or proceeding which, in the event of any unfavorable outcome, would or could reasonably be expected to have a Material Adverse Effect (as defined below) on the financial condition of the Company;
at all times reserve and keep available out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of this Note into Common Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of the Outstanding Principal Amount of this Note into Common Stock.
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"Material Adverse Effect"means (i) any condition, occurrence, state of facts or event having, or insofar as reasonablycanbeforeseenwouldlikelyhave,anymaterialadverse effect on the legality, validityorenforceabilityofthe Transaction Documents or the transactions contemplated thereby, (ii) any condition, occurrence, state of facts or event having, or insofar as reasonably can be foreseen would likelyhave,any effect on the business, operations, properties or financial condition of the Company that is material and adverse to the Company and its Subsidiaries, taken as a whole,and/or (iii)anycondition, occurrence, state of factsoreventthatwould,orinsofar as reasonablycanbeforeseen would likely, prohibit or otherwise materially interfere with or delay the ability of the Company to perform any of its obligations under any of the Transaction Documents to which it is a party.
8. Upon receipt by the Company of evidence from the Holder reasonably satisfactory to the Company of the loss,theft, destructionormutilationofthis Note,
(i) in thecaseofloss,theft ordestruction,uponprovision ofindemnity reasonably satisfactoryto itand/oritstransferagent, or
(ii) in the case of mutilation, upon surrender and cancellation of this Note, then the Company at its expense will execute and deliver to the Holder a new Note, dated the date of the lost, stolen, destroyed ormutilatedNote,and evidencing the outstandingandunpaid principal amount of thelost, stolen, destroyed ormutilated Note.
9. If any term in this Note is found by a court of competent jurisdiction to be unenforceable, then the entire Noteshallberescinded, the consideration profferedbythe Holderforthe remainingDebtacquiredbythe Holder not convertedby the Holder in accordance with this Note shall be returned in its entirety and any Conversion Shares in the possession orcontrolof the Investor shall bereturnedto the Issuer.
10. TheNote and theAgreement betweentheCompanyand theHolder (includingallExhibits thereto)constitute thefull and entireunderstanding and agreement between the Company and the Holder with respect to the subject hereof. Neither this Notenorany term hereofmaybe amended,waived,discharged or terminated other than by a writteninstrumentsignedbythe Companyandthe Holder.
11. This Note shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Delaware.
12. Conditions. The Issuer acknowledges the Investor's participation in respect to this Agreement is on a conditions permitting basis. In the event that the transaction risk profile substantially changes, market pricing or impliedvolatility substantially change, due diligenceraisesconcernsoranyotherconditions materialto thesuccessful closingofthetransaction change,theInvestor reservestherighttoterminatetheAgreementat anytimebeforedeliveringtotheNon-AffiliateDebtholder thecashconsiderationasdescribedhereof.
13. Miscellaneous.
13.1. Counterparts. This Agreement may be executed in any number of counterparts by original, facsimile or email signature. All executed counterparts shall constitute one Agreement not withstanding that allsignatoriesarenotsignatoriestotheoriginalorthesame counterpart.Facsimileandscanned signaturesareconsideredoriginal signatures.
13.2. Severability. This Agreement is not severable. If any term in this Agreement is found by a court ofcompetent jurisdictiontobeunenforceable,then the entireAgreement shallberescinded,theoutstanding principal and accruedandunpaid interest including Default Interest,at suchtime,notconverted by the Investor in accordance with this Agreement shall be returned in its entirety and all remaining Conversion Shares in thepossessionorcontrolofthe Investor orreserved bythe Company’s Transfer Agent shall bereleasedandreturned tothe Issuer.
13.3. Legal Fees. Except as provided in this agreement, each Party will bear its own legal expenses in the execution of this Agreement. If the Issuer defaults and the Investor is required to expend funds forlegal fees andexpenses, such costs will be reimbursed to the Investor, solely by the Issuer.
13.4. Trading Activities. Neither the Buyernor their affiliates has an open short position in the common stock ofthe Companyandthe Buyeragreethat they shall not,andthat they will cause their affiliatesnotto, engagein anyshort sales of orhedgingtransactionswith respectto thecommonstock oftheCompany.
13.5. Modification. This Agreement and the Note may only be modified in a writing signed by all Parties.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by an officer thereunto duly authorized, as of the date first written above.
AB INTERNATIONAL GROUP CORP. | |
By:/s/ Chiyuan Deng | |
Chiyuan Deng, Chief Executive Officer |
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Exhibit A.
NOTICE OF CONVERSION
Theundersignedherebyelectstoconvert $ ________________ofthe principalamount ofthe Note(defined below)into SharesofCommonStockofABInternational Group Corp.,aNevada Corporation(the"Borrower")accordingto theconditions oftheConvertibleNoteoftheBorrowerdatedas ofFebruary13, 2020 (the"Note").No feewill bechargedto theHolder orHolder'sCustodian for any conversion, exceptfor transfer taxes, if any.
Box Checked as to applicable instructions:
[ ] The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to theaccount oftheundersignedoritsnominee withDTC through its Deposit WithdrawalAgent Commission system("DWAC Transfer").
Name of DTC Prime Broker: ___________________________________________________
Account Number: ___________________________________________________________
[ ] Theundersignedherebyrequests that the Borrower issueacertificateorcertificatesforthenumberofsharesofCommonStocksetforthbelow(which numbers arebased ontheHolder'scalculation attached hereto) inthe name(s) specified immediately below:
Fidelis Capital, LLC.
EIN #: _________________
Date of Conversion | |||
Conversion Price: | |||
Shares to be delivered: | |||
Remaining Principal Balance Due After This Conversion: | |||
Signature | |||
Print Name: |
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